The root of these broader fiduciary concerns lies within the domain of compliance. Everything derives from what the regulators require, what any DOL audit might look at, and what might pique the interest of class-action attorneys.
Tag "fiduciary"
You cannot understate the fiduciary aspect of lower fees. Most 401k plan sponsors, and especially those in smaller plans, don’t have the time or expertise to administer their company’s retirement plan. If they skimp on fees, are they also skimping on the fiduciary protection those professionals are supposed to provide?
“The ERISA plaintiffs’ bar has overlooked the potential value of the Restatement’s prudent investor rule and its application to litigation involving 401k plans.”
This dilemma isn’t new. Trust officers have had to face it for generations. It’s called a “split-interest” trust. Multiply this split interest problem by the number of beneficiaries in a typical retirement plan and you can see how this conflict grows more complex.
While this might ruffle the feathers of ESG activists, those responsible for the day-to-day work of picking stocks have the real-world experience to fully understand where Buffett is coming from.
The Biden Rule, like the Trump Rule, does not encourage or discourage the use of ESG criteria when selecting investments. This allows fiduciaries to either adopt ESG principles or ignore them.
Not only do you need to watch the place that holds all the money, you need to watch the pipeline that feeds the money there.
If a fiduciary feels carrying out legal duties entails a high cost, there is an acceptable strategy for dealing with this, but the fiduciary must execute it before the client signs the contract.
Let’s not just blame certification providers. Government agencies responsible for monitoring and enforcement are also responsible for market confusion and the dilution of the “fiduciary” standard.
Documentation, due diligence, and other formal compliance matters are critical to reducing the fiduciary liability of 401k plan sponsors. But ultimately, they are responsible for safeguarding the assets of plan participants.
